Where your tax dollars go

By Jonnelle Marte

Whether you’ve just paid your taxes – or are still putting it off until closer to tonight’s midnight deadline— you might be wondering what Uncle Sam is going to do with the check you just wrote.

Reuters

Perhaps to help soften the blow of cashing those checks, The White House updated the federal taxpayer receipt, a tool that breaks down how the money is spent. People can enter how much they paid in Social Security, Medicare and income taxes – numbers that should be spelled out on the tax returns they just completed—in order to estimate how their tax dollars were spent based on the 2012 budget data released last week. Taxpayers can see roughly how much of their tax bill went toward federal expenses like national defense, health care and agriculture.

Last year’s largest federal expense was national defense, which made up 24.64% of overall federal spending in 2012. Next up was health care, including Medicaid and Medicare, which accounted for 22.45% of federal spending. Then came jobs and family security, which made up 17.26% of spending and includes programs like unemployment insurance, the earned income tax credit and disability programs.

As MarketWatch previously reported, many taxpayers loathe the tax-filing process not just because of the ever-changing tax code, but because many have big misconceptions about how their tax dollars are being spent. For instance, Third Way, a centrist think tank based in Washington, D.C., reported in 2010 that Americans surveyed said they believed the government spent 20% of the budget on foreign aid, a far cry from the actual ratio of less than 1%. And a 2011 survey by the Pew Research Center found that only three in 10 Americans knew at the time that the government spent more on Medicare than on scientific research, education or interest on the national debt.

Third Way also offers a tool that estimates how tax dollars were distributed among expenses like foreign aid, low-income assistance and law enforcement, based on the 2011 budget. But taxpayers using these tools to eyeball federal spending today should keep in mind that the distributions may be different this year because of the federal spending cuts that kicked in starting March, says Sean Gibbons, vice president for communications at Third Way.

Story Conversation

About Tax Watch

Only two things in this world can be said to be certain, according to Benjamin Franklin. Tax Watch is about one of them. The blog examines the complicated tax issues and legislative changes to help you tackle tough personal finance challenges – and avoid costly tax missteps. The lead writer is MarketWatch reporter Jonnelle Marte. Contributors include columnists Bill Bischoff, Andrea Coombes, and Eva Rosenberg.